Loyalty Penalty Ban on Auto and Residence Insurance Clients Comes into Impact – Sky Information

From January 1st, new regulations prohibiting loyalty bonuses for car and home insurance customers will come into force.

The rules mean that customers who renew their policy must offer a price no higher than if they were a new customer.

They were designed to combat the "price walking" practice, in which companies offer cheap deals to attract new customers, but then increase the price each year as they renew.

The rules apply to both home insurance and car insurance

The Financial Conduct Authority (FCA), the announced the changes Early in 2021, believes it will save consumers £ 4.2 billion over the next decade.

But it is likely that the biggest discounts will no longer be available to people who regularly shop for a cheaper deal.

The new rules apply to renewal notices from January 1st.

If in December a consumer received an extension notification for a policy extended after January 1st, the regulations do not apply.

The changes come according to a 2018 study that found customers who stuck with their existing insurance policies were overpaying £ 1.2 billion a year.

Sheldon Mills, FCA's Executive Director, Consumer and Competition, said, “Our interventions will make the insurance market fairer and better.

A security officer patrols the entrance area of ​​the headquarters of the new Financial Conduct Authority (FCA) in London's Canary Wharf business district on April 1, 2013.

The FCA expects the new regulations to save consumers £ 4.2 billion over a ten-year period

"Insurers can no longer punish consumers who stay with them.

"You can still shop around and get a better deal, but you don't have to switch just to avoid being billed a loyalty reward.

"We are closely monitoring how insurers react to our new regulations to ensure that consumers benefit from the benefits of a better insurance market."

The changes are part of an upcoming reform package that also includes rules to make it easier for consumers to cancel auto-renewals and requirements for companies to demonstrate that their products provide reasonable value to customers.

The Association of British Insurers (ABI), which represents the industry, said companies are likely still able to offer competitive deals to new customers, but that prices could be higher for those who shop regularly.

Spokesman Malcolm Tarling said there would be a "realignment of premiums between new and existing customers".

Martin Lewis, founder of MoneySavingExpert.com, previously warned: "In the short term, this change could lead to a price increase for those who switch."

At the time the rules were announced, the FCA said that "it is likely that companies will no longer offer unsustainable deals to some customers".

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